chapter 7: product strategy and new-product development part 3: develop the value offering—the...
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CHAPTER 7:PRODUCT STRATEGY AND NEW-PRODUCT DEVELOPMENT
Part 3: Develop the Value Offering—The Product Experience
McGraw-Hill Education
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
LEARNING OBJECTIVES
Understand the essential role of the product experience in marketing
Define the characteristics of a product Recognize how product strategies evolve from
one product to many products Understand the life of a product and how product
strategies change over time Recognize the importance of new-product
development to long-term success Understand the new product development
process Identify how new products become diffused in a
market
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Product Characteristics
A product is anything that delivers value to satisfy a need or want and includes physical merchandise, services, events, people, places, organizations, information, or ideas.
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Product Characteristics
Defining the Product Essential Benefit is the fundamental need
met by the product (getting from point A to point B on an Southwest Airlines)
Core Product is the physical, tangible elements. (One kind of aircraft, low fares, good website)
Enhanced Product includes additional features, designs, and innovation that exceed expectations. (Frequent flyer program, fun and entertaining flight attendants)
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Four Products and Their Essential Benefits
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CH
AP
TER
01
DEFINING THE PRODUCT AT SOUTHWEST AIRLINESEXHIBIT
7.2
Enhanced ProductExperiences exceed minimum expectations
Frequent flyer programsReserved seating
Core ProductOn time
SafeExperience matches expectations
Essential Benefit
Moving from PointA to Point B
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Product Classifications
Tangibility – physical aspects of the product experience
Durability – product usage
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Product Classifications
Consumer Goods
Convenience Goods
Shopping Goods
Specialty Goods
Unsought Goods
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Product Classifications
Business Goods
Materials Parts
MRO Supplie
s
Capital Goods
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Product Discrimination: Create a Point of Differentiation
Form
Features
Performance Quality
Conformance Quality
Durability
Reliability
Repairability
Style
10-10
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Product Plan: Moving from One Product to Many Products
Product Line: A group of products linked through usage, customer profile, price points, and distribution channels or needs satisfaction
Product Mix: all the products offered by a company
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Product Decisions Affect other Marketing Mix Elements
Pricing Individual product pricing within the product
line “good, better, best” product line strategy Technology companies face special challenges
as newer models have better features and lower prices
Marketing Communications Focus on a single product or the brand? Allocation of budget: Most popular products?
Entire line? New products?
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BUILDING THE PRODUCT EXPERIENCE
Product Life Cycle Product Life Cycle Sales Revenue and Profitability
Product Life Cycle Timeline Product Life Cycle Caveats
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THE PRODUCT LIFE CYCLEEXHIBIT 7.12
Reprinted from Roger Kerin, Steven Hartley and William Rudelius, Marketing 9E, 2009.
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Product Life Cycle
Introduction Phase
Market Conditions
10-15
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Product Life Cycle
Growth Phase
Market Conditions
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Product Life Cycle
Maturity Phase Phase defined by the sales growth of the product category1.Relative Market Expansion2.Market Stability3.Market Deterioration
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Product Life Cycle
Maturity Phase
Market Conditions
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Product Life Cycle
Decline Phase
Market Conditions
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New Products Defined
Company Perspective New-to-the-World
Disruptive Innovation are so innovative they create a fundamental change in the marketplace. Ex. Cell phones, tablets
Sustaining Innovations are newer, better faster versions of existing products or additions to existing product lines. Ex. Diet Coke, Coke Zero
Reposition Existing Products Add new market segments Ex. Cell phones from
business usage to adults to teens Cost Reduction
Introduce lower cost products with fewer features or scaled back warranty or service
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New Products Defined
Customer’s PerspectiveThe customer’s perspective is much
more narrow and self directed.The customer is most interested in an
answer to the fundamental question—is this new product new to me?
First purchase of a cell phone , house or auto can be a intimidating experience
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Why do Products Fail?22
New Product Development Process
The three major activities in new product development are: 1. Identify Product Opportunities2. Define the Product
Opportunity3. Develop the Product
Opportunity
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Identify Product Opportunities24
Generate New Ideas
Internal External
Customers
Distributors
Screen and Evaluate IdeasGo-to-Market Mistake
Firm fails to keep a bad product idea from moving into product development
Stop-to-Market MistakeA good idea is eliminated prematurely
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Identify Product Opportunities
Identify Product Opportunities
Screen and Evaluate Ideas Prioritize ideas that pass initial
screening and evaluationTime to market (how long will it take to
develop and get the product to market).
ROI (what is the expected return for the dollars invested in the project).
New product fit with overall company product portfolio.
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Define the Product Opportunity
Define the Product Opportunity Define and test the
product idea Create a marketing
strategy Analyze the product’s
business case
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Define the Product Opportunity
Define and Test the Product Concept Product Definition Objectives
Define the value propositionIdentify the target market and
purchase frequencyDelineate the product characteristics
Look, feel, physical characteristics, features
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Define the Product Opportunity
Create the Marketing Strategy29
Budget
Pro
motio
n
Place
Price
Pro
duct
TargetMarket
Define the Product Opportunity
Define the Product Opportunity Conduct Business Case Analysis
Total DemandNew purchasesRepeat purchasesReplacement purchases
Profitability Analysis Long and short term analysis
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Define the Product Opportunity
Define the Product Opportunity Conduct Business Case AnalysisTotal Demand
New purchasesRepeat purchasesReplacement purchases
Profitability Analysis
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Develop the Product Opportunity
Develop the Product Opportunity Develop The Product
Product Testing: alpha and betaTest the Market
Consumer Product Market Tests Business Product Market Tests
Product Launch
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CONSUMER ADOPTION AND DIFFUSION PROCESS Consumer Product Adoption Process
Innovation diffusion process is how long it takes a product to move from first purchase to last purchase (the last set of users to adopt the product).
An individual moves through five stages before adopting a product.
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Awareness
Interest
Evaluation
TrialAdopt
ion
The Diffusion of Innovations
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